Foreclosure crisis: 'Zombie' houses stalking Central Mass.

WORCESTER — The grass is kept short, but there's no car in the driveway at the brown house at the end of Vermont Avenue.

There's some mail in the box, but the mailwoman pulls it out.

"Must have been someone who didn't know what they were doing," she said, tucking a few envelopes away in the mail truck. She points out three letters written in black permanent marker on the back of the dark green mailbox door: "VAC."

It is one example of homes scattered through every neighborhood of the city that have become known as "zombie properties." They are homes stuck for years in the foreclosure process that have been abandoned by their occupants.

The rise in zombie properties is another, more long-term result of the housing bubble that collapsed in 2008, caused by a glut of failed so-called subprime mortgages, often written to borrowers who were not asked to demonstrate an ability to repay the loan. Within a few years, many of these properties fell into foreclosure. After a scandal involving widespread shoddy practices on behalf of major banks filing the foreclosures came to light in 2010, Massachusetts and other states boosted regulations.

However, drawing out the process has resulted in an increase in the number of abandoned properties and a longer lag time before those properties can be put up for sale.

A sign of a stubborn and slow economic recovery process, Worcester County has been ranked as having one of the top 10 highest rates of zombie properties in the country, compared with other metropolitan areas by California-based RealtyTrac, which tracks foreclosure trends across the country.

According to the RealtyTrac data, 33 percent of the nearly 400 homes in foreclosure in Worcester County were identified as abandoned.

In the city of Worcester, though, the number of vacant homes in foreclosure is estimated to be much higher by city officials who keep tabs on them.

"I say they're cursed," said Lee R. Hall, principal sanitary inspector for the city. She said in the late 1990s, she was familiar with every vacant property in Worcester. "Two years is not really very long for these properties" to sit vacant waiting to be foreclosed.

As the average foreclosure has been taking longer and longer in Massachusetts, there has been a boost in the number of people who move away from their home before ownership is transferred back to the bank, which then gains the right to evict them and subsequently sell it.

Now, with hundreds on the city's ever-changing list, "I just can't keep track of them all," Ms. Hall said.

For Massachusetts homes that completed the foreclosure process in the second quarter of this year, RealtyTrac reported this week that it took an average of 784 days, up from 706 days during the first quarter of the year.

"The root of this problem does go back to the robo-signing issue... and really it was the banks getting caught in some cases with sloppy at best paperwork to document the foreclosure," said Daren Blomquist, vice president of RealtyTrac.

In the height of the recession, the foreclosure process, which involves a lot of paperwork, was greatly complicated by bank buyouts and the transfer of the mortgage to another financial institution, in less than a year.

"I do think it will go down when the banks are finally working through that old inventory," he said.

Mr. Blomquist also warned that the zombie properties are "an indicator (of the lack of demand in the real estate market) as well as a self-fulfilling prophecy of a market that is lagging," he said. "If you're driving through a neighborhood, they tend to be the homes in the worst condition and dragging down home values."

Tim Davis, an independent researcher who works on behalf of the Massachusetts Housing Partnership, said that like many other urban communities with a higher rate of low-income and new immigrant populations, Worcester is seeing the result of high-interest loans offered during the housing bubble to people who would not normally qualify.

"There might be a couple short-term rises in foreclosures, but we really are in the final cleanup of the subprime loans," he said, also noting that he has seen a boost in short-term sales as an alternative to banks completing the foreclosure process.

The house on Vermont Avenue has been empty for two winters, said Jonathan Leary, a teacher who has lived next door with his girlfriend for the last four years.

"It was sudden," Mr. Leary said. "When the moving truck came they said, 'We're getting foreclosed,' and said the family, who bought the house in 2006, had found a place to rent in a nearby town.

The home fades into the background of the quiet neighborhood in the western part of the city, near the airport.

Give it a second glance, and a passerby may notice weeds sprouting from the gutters, or that the iron railing along the front steps of the home has rusted through. The gap between the front door and the exterior glass door has been overtaken by spiders, their webs flourishing without interference of human traffic.

In the overgrown garden, a white paper with a piece of dry scotch tape indicated that the home was last inspected by a management company based in Brandon, Florida on June 29.

According to property records, the family received a notice of complaint a week before Christmas in 2009. It said the bank "has filed with (the state's trial court) a complaint for authority to foreclose said mortgage... by entry and possession and exercise of power of sale."

Then, for five years, there was apparently no activity, according to public records.

The home is still technically owned by the family, as the bank has yet to complete the foreclosure process, though the notice was reissued a few weeks ago.

Until the foreclosure is finalized, the house is highly unlikely to be sold, even if an interested buyer were to emerge and negotiate a short sale.

"They feel they have very little recourse," said Mullen Sawyer, executive director of the Oak Hill Community Development Corporation, the umbrella organization for NeighborWorks Home Ownership Center of Worcester.

He said even though someone may be able to stay in their home for years before they are actually ordered to leave, these people are left to wonder: "Is today the day I'm going to come home and find an auction sign in the front yard?"

Andrea M. Park, staff attorney at Harvard Legal Aid Bureau, who lives in Worcester, provides legal assistance to those who are in the foreclosure process.

She said while a foreclosure notice seems black and white, homeowners should know that they have the right to stay in their homes until a bank is issued an order from a judge that forces the occupant to leave.

"They can know it's not going to happen tomorrow or next week," she said. Even still, though, homes in the foreclosure process that are still inhabited fall into disrepair since the homeowner will see no return on investment for the cost of any improvements.

"One harsh winter is all it takes is for a house to go from pretty good shape, to not," she said.

When a home is abandoned, the responsibility falls on the banks to ensure the home does not become a safety hazard or an or an eyesore. They also must pay the property taxes.

In the city of Worcester, banks must post a $5,000 bond when they file initial foreclosure paperwork, which will be used to keep up the property if the banks fail to do so. That ordinance is currently being challenged in court.

Realtor Nilton Lisboa is one of the people charged checking on these zombie properties to ensure they are maintained properly.

"I want to get these properties sold," he said. "We know there's no one living there. We know it's an eyesore, but there's nothing we can do about it, because we have to wait for the banks."

Of the roughly 100 million homes in the country, and about 5 million that were foreclosed on during the housing crisis, only about 150,000 currently fall under this category, said Mr. Blomquist.

Zombie properties are "a very small sliver of the market but it has a disproportionate affect," he said. "These are the broken windows in each neighborhood. Even if there's just one of them it impacts the value of the surrounding homes."

Contact Alli Knothe at allison.knothe@telegram.com

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